Saturday, December 31, 2011

It is the time of year when many people make new year’s resolutions, and I have one myself. In 2012 I want to do better at staying above the fray, looking toward long-term solutions rather than arguing each day’s hottest controversies.

Contrary to what you might see in many of my posts in 2011, not to mention much of the writings of other economists, it is not an economist’s job to offer opinions on whatever political feud or business debacle people are discussing that day. Even technical insight is of little value unless it helps people make better decisions. I said last year that economists should be more like sports commentators, creating a narrative for the flow of events and for what might happen next. That would at least help people understand what decisions are there to be made. It is no accident that sportscasters sit ten meters above the playing field. They could hardly tell you how the game was going if they were down on the field in the middle of the action. It is a perspective I will try to remember in the new year as I comment on life, the world, and matters of economics.

Friday, December 30, 2011

To back up their various court cases against Bank of New York Mellon, government entities reportedly have inside information from the bank, including a detailed description of the methodology the bank used to generate phantom currency transactions. The bank is accused of distorting currency transactions in order to charge state pension funds billions of dollars in extra fees.

Verizon Wireless seemed to be taking a page from Bank of America’s book. It was at the end of the third quarter that Bank of America announced new transaction fees that helped to inspire Bank Transfer Day. Exactly three months later, Verizon Wireless announced a new bill-paying transaction fee. The move sparked a similar kind of uproar, along with an FCC investigation, and the backlash led to a quick reversal from Verizon. Verizon’s move came at the same time that lawmakers in the United Kingdom are working on new rules to curb the same kind of transaction fee abuses.

Thursday, December 29, 2011

I wrote last week about my plan to give pies instead of factory-made presents for Christmas. I was not the only one cutting back on the excesses of Christmas this year. It seemed that people broadly were trying to make Christmas a more focused holiday this year.

There were at least 40 percent fewer Christmas lights in my local area. The mild fall weather and higher electric rates must be a factor, but are not enough by themselves to explain such a large decline.

Retail Christmas shopping traffic started late, only six days before Thanksgiving from what I could see, then fell off more than ever in the two or three weeks after Thansgiving weekend, picking up again just in the last five days before Christmas.

During the Christmas shopping season, many stores had no Christmas decorations at all on display. Others had cut back to decorations less than half the size of last year.

On Christmas Eve, the pope warned specifically about the commercialization of Christmas.

After Christmas, there was heavy retail traffic on December 26, but not much in the days since.

After Christmas, Sears and Kmart wasted no time in announcing a new round of store closings.

Stores wasted no time moving out Christmas-specific merchandise. I personally bought some Christmas items that had been marked down by about half on December 24 and again on December 27. In other stores that I visited in the days after Christmas, stores that in years past would have spent weeks clearing out excess Christmas items, there was no sign of any Christmas items remaining.

In a survey, about two thirds of U.S. workers were not taking any days off this week other than the holidays scheduled by their employers. I did not take any days off myself.

I saw no sign on Christmas Eve and Christmas that people were taking the holiday itself any less seriously. But people seemed determined not to let Christmas spill over across the entire month of December. The result was a more focused and arguably a more meaningful holiday.

Wednesday, December 28, 2011

The large-screen television wave had obviously passed its peak at the beginning of November, when I predicted falling prices, especially after Christmas. The television business, though, was waiting to see how the Christmas shopping season would work out. Now that it is winding down, they are on the verge of panicking. According to a new New York Times story, Sony is exasperated at its continuing losses on televisions. After two years of tinkering, it is planning more drastic steps. For its part, Google doesn’t seem to know how to rescue its foray into the television business, which was largely forgotten by the time the Christmas season rolled around.

Best Buy drew large crowds on Black Friday with low prices on televisions, but with the low prices, probably lost money on many of the units. It was a process that was repeated on Boxing Day, and further price cuts are inevitable next month as manufacturers are forced to cut their prices just to get products into already overstocked stores. With near-zero margins on televisions, Best Buy is reporting earnings one third lower than the year before.

Sears and Kmart were counting on strong Christmas-season television sales, along with other electronics. That did not materialize, and the company will be closing about 120 stores, it announced yesterday.

Televisions were expected to be a large after-Christmas item, but aside from Boxing Day itself, foot traffic at after-Christmas sales has been poor, as shoppers seem eager to put the Christmas shopping season behind them. With shoppers not paying attention, price reductions may not be enough to move the overhang of television inventory.

And there is a separate concern hanging over the television business. A few observers are predicting a move by Apple into self-contained television units in 2012. If, as rumored, Apple can take a 37-inch Sharp display and make it more cool than a large-screen television by making it easier to use, that could add further pressure to an already overextended category.

It could end up being good news, though. If Apple can convince consumers that the old-fashioned, 100-button, channel-surfing remote control is just too complicated, it could drive a new wave of shoppers into stores looking for something simpler.

Tuesday, December 27, 2011

It’s no secret that 2011 was the story of one disaster after another. There were floods and typhoons in Queensland, a historic earthquake in New Zealand, a series of nuclear meltdowns in Japan, and it went on from there.

Add it all up around the world and it was the most costly year of disasters ever recorded by the insurance industry. That is only one way of measuring disasters, but by any broad measure, 2011 was a year of an extraordinary number of disasters.

I personally experienced, only a few days apart, an earthquake and a hurricane. I was far enough from the center of each, but they were nevertheless very worrisome events.

That was in August, and by then, people had become so accustomed to a steady stream of disaster headlines that many were dismissive of the worst hurricane and earthquake to strike my local area in decades.

The coming year may have been tipped as a year of major, sweeping changes, but there is reason to hope that we may have better luck in 2012 when it comes to disasters.

Sunday, December 25, 2011

Over the past year, Arctic sea ice has alternated between record and near-record low levels. In early September, the extent of sea ice either hit an all-time low or came close, depending on the model you used to slice the data up. Between June and September, cargo ships crossed the Arctic Ocean as if they had been doing it all along.
The year ends with ice extent near the lowest it has ever been at this time of year. It is harder to guess at the thickness of sea ice, but the ice this year probably has also been the thinnest ever.

And all this happened with nothing more than the usual fluctuations in the weather. No one can predict when the Arctic sea ice could melt away completely because it would take only one spring of extreme weather conditions to make that happen.

Saturday, December 24, 2011

Spoiler alert: This post describes Christmas presents that have not yet been delivered.

As I write this, Christmas Eve has turned to Christmas in much of the world. The pope took the occasion as an opportunity to decry the commercialization of Christmas, urging people to see through the bright lights and tinsel.

This is, of course, not a new thought. The satirical Christmas rock band I play in, Bah and the Humbugs, makes fun of the commercialization of Christmas every single year. But what, specifically, can one person do to make Christmas less of a competitive commercial experience?

Last year, I wrote the song “Give and Get Pie” to urge people to consider giving more personal, handmade gifts, such as pie, at Christmas. Right away, people commented that it sounded like the title of a Paul McCartney song (as if I hadn’t been aware of that), and attempted to sing the song to the tune of “Live and Let Die.” The mashup was something of a train wreck, but at least they were putting their own thought and attention into it. I remember those moments more vividly than any factory-made product anyone gave me last year.

When I wrote the song, I had meant pie as just an example, but when I thought about it, it seemed an especially good example of a handmade Christmas gift. Pie is part of the Christmas tradition already, and pie is a consumable, perishable product, so it can’t add to people’s clutter from year to year. This year, I decided I would try to live up to the idea of “Give and Get Pie” by giving pies for Christmas.

As I write this, the pies are in the oven. I have never baked so many pies at once. I do realize it won’t quite work out if everyone I give a pie to also gives me a pie. I couldn’t possibly eat that much pie myself! If it comes to that, maybe we could arrange to make smaller pies. But if some of the pie ends up going to waste, that risk is no different from that of any other Christmas gift. With pie, at least, the financial consequences are slight. The cost of materials is about $3 per pie. Even if you were to go for something extravagant, it could not exceed $10. This is not much compared to gifts I have given in the past. Even the time commitment is not extravagant. If I end up spending 1 hour per pie, that is less time than I have sometimes spent agonizing my way along the store shelves trying to find a suitable gift to buy.

After people started trying to sing “Give and Get Pie” to the tune of “Live and Let Die,” I had to help them out by writing proper parody lyrics that would actually go with that tune. For those Paul McCartney fans who want to try to sing along, it starts out something like this:

When you were young and you wrote out a Christmas list
You used to say give and get gifts
But if this endless Christmas commercialization
Makes you give in and cry
Say give and get pie.

Friday, December 23, 2011

The United Kingdom is taking steps to eliminate surprise card payment surcharges tacked on by sellers. These can sometimes amount to more than $100 for a credit card payment.

Bank of America fell below $5 for half of a trading session this week. The low price put it in the “danger zone” in which many traders are prohibited from buying the stock on margin. That makes a stock harder to buy and can lead to further erosion in its price. The stock recovered the next day, in part because of reports of a legal settlement, which saw the bank’s mortgage lending unit pay less than $1 billion to settle charges of systemic discriminatory lending practices.

It is so much harder to be a kidnapper after you let slip that you have a conscience and don’t really want to hurt your victims. All of a sudden, you have to start negotiating everything. That is the predicament the House Republican caucus will find itself in when the next session of Congress begins in a few weeks.

All year long the House Republicans have been holding the national economy hostage, threatening to blow up the train if they didn’t get their way. In July, having put the U.S. government into bankruptcy, they issued a series of demands, and when those were met, responded by issuing more demands. It was more of a tantrum than a negotiating tactic.

It was the same thing this week, but the outcome was different this time. There was something obviously off about the performance when the House Republicans stabbed their Senate colleagues in the back, then held a gun to Santa’s head and exclaimed, “What’s in it for us?” The tantrum was real, but the threats were hollow. In the end, left alone in the house with the biggest bomb they could have had on their Christmas wish list, the House Republicans failed to light the fuse.

It is the same Congress that comes back in a couple of weeks, and it will be inevitably be the same pattern of brinksmanship, but it won’t be quite the same after this. It can’t be, now that the whole world knows that the House won’t really blow up the U.S. economy.

Thursday, December 22, 2011

Crystals have been implicated in the “faster than light” performance of CERN neutrinos. As the tiny particles passed through mountains on their way from Switzerland to Italy, they went “faster” than they would have in empty space, possibly the result of the crystals they passed through.

Separately, crystal effects are being used to cool atoms to absolute zero. A crystalline lattice created by lasers is used to bump out the warmest atoms, leaving just the coolest ones behind. This technique cools the atoms to about one billionth of a kelvin, or about as close to absolute zero as has ever been observed.

The resulting arrangement of atoms has not been formally designated as a crystal, but it probably is a crystal, based on the way physicists are describing it. Crystals are important because of the way they distort spacetime, producing coherent arrangements of energy. The coherent light of a laser beam is the best known example of this, but as more specific examples are discovered and studied, physicists may come to a more general understanding of the effect.

Wednesday, December 21, 2011

Imagine if the band got together for the Christmas and just sat around. Afraid of possibly playing the wrong song or the wrong note, the musicians put off their music-making until it was too late to play anything.

That is what this year’s economic policymaking has been like. The United States urgently needs to add renewable energy capacity, end tax subsidies for unproductive activities like residential construction, find out what kind of financial threat is posed by derivatives, reduce the burden of health care costs on workers and employers, and rebuild its transportation infrastructure. These issues have been looming for at least 7 years, and are needed before the economy can be restored to a semblance of health, yet not all of the basic, first-day steps have been taken yet. Instead, Washington is paralyzed in endless arguments over unrelated or even counterproductive measures. Congress, for example, voted yesterday to phase out unemployment compensation, a move that will probably just be undone next month.

And, according to Nouriel Roubini, the situation is no better in Europe and China. Leaders there too are politically paralyzed and are responding to economic imbalances by kicking the can down the road. This may not work in 2012, he warns: “If the world’s biggest economies continue to play the same game and try to kick the cans further down the road for another year, the cans will become bigger and heavier and eventually hit a brick wall.”

It was the same situation in the lead-in to the Great Depression. The stresses and imbalances were obvious. Political leaders, afraid of hitting a sour note, stood by and did nothing. And citizens and pundits essentially sat back and waited for the king to fix everything — an attitude that you might have thought had gone out of style in the 1700s.

Given the current political pressures, governments cannot be expected to solve the problems the world economy faces. It will require individual action. The countries that wait for their political leaders to fix things will be the ones that have a hard landing in 2012, then fall behind as the new global economy begins to take shape.

Tuesday, December 20, 2011

AT&T’s bid to buy and shut down competitor T-Mobile didn’t get far, and AT&T has officially killed the deal. Now T-Mobile is forced to reinvent itself. It lost nearly a million subscribers while the AT&T buyout was pending, because people don’t like making a two-year commitment to an operation that is preparing to close. This is a financial blow, but by cutting some of the ties to the past, it puts the company in the best position of any wireless carrier to transform itself into the wireless company of the future, based on the assets it has.

As the most obvious example, since T-Mobile doesn’t own lots of spectrum rights, it could be the first phone company to finally make good use of wifi. Whatever T-Mobile’s answer is, though, now is the time.

Monday, December 19, 2011

A temporary payroll tax cut looks likely to die in the House of Representatives today, with the House Republican caucus drawing a line in the sand. With it, extended unemployment benefits will also expire. As these measures expire December 31, both the temporary payroll tax cut and unemployment compensation eligibility end. The unemployment compensation will surely be taken up again when the next session of Congress convenes in January, though probably in a reduced form.

For the payroll tax cut, though, there probably isn’t any politically feasible way forward. The Senate, which passed the extension by a vote of 89–10 only to be blindsided by the House, is unlikely to try the same thing again. The expiration of the tax cut will have the economic effect of a 2 percent pay cut for workers, which may translate into about a 5 percent decline at retail, along with a drastic decline in saving. The expiration of unemployment benefits, even if they are revived after a few weeks, will also have a chilling effect on household spending.

This is an immediate worry for retailers, which found themselves overextended for the holiday season even before a dismal last weekend before Christmas. With consumers facing a take-home pay cut and the loss of unemployment benefits, after-Christmas sales may be sparsely attended, leaving retailers with merchandise they can’t sell.

To see the connection, you have to look at the way temperature and pressure give rise to wind speed and direction. The less consistently cold Arctic decreases the speed of the jet stream, and this is making a jumble out of the upper-level winds. The jet stream is the high-speed, high-energy upper-level wind pattern that keeps the other upper-level winds in line. When it has less energy, upper-level winds can blow in all directions.

In particular, more upper-level loops are forming. An upper-level loop keeps the same air mass over the same area for a period of time. This can create persistent weather patterns that give rise to extreme storms, floods, droughts, and high winds.

Saturday, December 17, 2011

A controversial bill that would have largely lifted the restrictions on robocalls to cellular phones has failed.

When first introduced, the bill was billed as a noncontroversial “technical correction” that should pass quickly and without much discussion. Its author, Lee Terry, said it wasn’t fair to businesses that they couldn’t robocall their customers who didn’t have, or refused to disclose, land-line phone numbers. The bill would have lifted those restrictions, allowing utility companies, banks, bill collectors, retailers, and others to place robocalls with virtually no restrictions. It was supported by large banks, utility companies, and phone companies.

But it was hard to find anyone else to support it. Internet commenters didn’t have any sympathy for the bill or its author. Consumer groups worried about the billions of unwanted calls that would have resulted. A letter from 48 state attorney generals warned Congress of the possible consequences. After 10,000 constituents called to oppose the bill, and 200,000 people signed petitions against it, Terry was finally forced to withdraw it.

That the bill advanced as far as it did, though, is a sign of what is wrong with the economy. Powerful commercial interests advance imagined solutions for their own problems without giving any thought to the consequences, including the hassles they are creating for others. Those hassles, then, are what ruin the economy.

Robocalls have already ruined the wireline telephone business. Unchecked, they could bring down the entire telephone network, as people stopped answering their phones. It is only people who aren’t imagining the whole picture who could imagine that this would be a form of progress.

Friday, December 16, 2011

A minor run on the largest bank in Latvia last weekend led to Monday worries about a possible worldwide run on the banking system. This set up a stock market rout on Monday, which hit European and Wall Street banks especially hard. The worldwide bank run never materialized, and in retrospect, the withdrawals in Latvia were nothing to worry about. People were not taking out all their money, just an average of $200 each, enough to get by for a few weeks in the event that the bank were to close its doors. That is something everyone who can should do anyway in these troubled times.

A U.S. government shutdown is still a possibility, as Congressional leaders were still looking for a path to a budget agreement as of this writing. Whenever there is a shutdown, bank regulators and deposit insurance continue to function.

There were two small bank closings tonight, each with less than $150 million in deposits.

Western National Bank, 3 branches, Phoenix, Arizona. An out-of-state bank is taking over the deposits and assets.

Premier Community Bank of the Emerald Coast, 2 branches, Crestview and Fort Walton Beach, Florida, in the Florida panhandle. A local bank is taking over the deposits and assets.

This is likely the end of bank failures for 2011. There were 92 bank failures for the year, half the pace of the previous two years. The lists of problem banks are not shrinking by much, however, nor is the economy improving enough to predict that the number of bank failures will decrease again next year.

Thursday, December 15, 2011

The weather-related hard disk drive shortage is real, if not particularly severe so far. It is still no problem to purchase a new hard disk drive for a desktop computer, but there is enough of a shortage that retailers have had to restrict quantities to protect their inventory from hoarders.

Some computer hardware makers have blamed poor recent sales on the hard drive shortage, but that is likely just a convenient excuse. Businesses have slowed desktop computer purchases as they anticipate a shift to notebooks and tablets. Unless something happens to change their minds, this trend will turn into a permanent decline in the use of desktop computers.

Tuesday, December 13, 2011

U.S. November retail statistics released this morning confirm what retailers had already been saying: it was a big Black Friday, but not big enough to make up for the late start in Christmas shopping. With few early sales, shopping did not really get underway until a week before Thanksgiving.

With public opinion surveys showing shoppers tapped out after spending more than they planned on Black Friday, selling may not pick up again until the after-Christmas sales. Christmas and New Year’s Day fall on weekends this year, and many people will be on vacation for the whole week in between, finally allowing them some time for shopping.

The strong Black Friday was perhaps not such a bonanza for retailers. Best Buy, widely cited as one of the Black Friday success stories, reported a decline in profits this morning. Its profit margin is smaller than last year as it cuts prices to meet competitors. With its Black Friday price cuts, it may have just broken even on that day. Other retailers are worrying about margins, especially in clothing and electronics, and especially if it turns out that much of their merchandise is still on the shelves for the after-Christmas sales.

Monday, December 12, 2011

Over the weekend I saw plenty of activity at local retail early, but it tailed off drastically as late Saturday afternoon arrived, with not much to talk about on Sunday. Some of this may be the payday effect, with people returning to stores with their Friday paychecks to make late Christmas purchases.

Surveys have indicated that consumers spent more than they planned on Black Friday and may be tapped out. Retailers who are thinking of deep after-Christmas discounts may instead want to extend their after-Christmas sales well into January to let shoppers collect another paycheck. When shoppers are tapped out, they can’t buy no matter how deep the discounts go. Some of the stock, too, might be better saved for next November, as so much of this year’s seasonal stock was held over from last year.

Two weeks later, there is some caution about the Black Friday results. Apple and Amazon did extraordinarily well, from what we can tell, but with them excluded, Black Friday was not really that good.

Locally, clothing discounter Syms is going out of business. It has done surprisingly well in its liquidation, mostly clearing out the store at discounts of 30 to 50 percent. Those are not deep discounts at a store where older merchandise is automatically discounted. This liquidation success reminds me of the success of the Borders liquidation. It suggests that consumers are willing to buy at lower prices. Prices do not have to be shockingly low to get consumers to buy. This is a deflationary signal, though I do not give it much credence; there are still plenty of indications of resistance to price changes.

Sunday, December 11, 2011

News reports are depicting the United Kingdom as the “loser” in recent negotiations in Europe, and now “isolated” as it alone opts out of the proposed European fiscal union, in which the other European Community nations agreed to cede a portion of their fiscal sovereignty to the European Union.

In reality, it is the countries that opted in that are the losers, while the United Kingdom’s increased flexibility puts it in a new leadership role in Europe. Some economists believe the new European fiscal union, assuming it succeeds in passing, will usher in a lost decade in Europe, an extended period with little or no growth in per capita GDP. The United Kingdom, though, will easily avoid this, and could plausibly form the largest national economy in Europe by the time we get to 2022.

Some good could come from the coordinated fiscal actions in Europe. Bizarre business taxes like Denmark’s coconut oil tax could be repealed, along with narrow tax exemptions that allow businesses to enjoy a tax haven in a particular country. Businesses that move operations between countries to avoid taxes are not the cause of the EU’s financial problems, though, and at this point, the fiscal union is a dangerous and problematic distraction that can only prevent Europe from addressing its real issues.

There is some indication that the fiscal union will not entirely succeed. Poland’s participation in the bailout fund, for example, appears to be larger than that country’s constitution will permit. Meanwhile, today, polls indicate that a plurality of Britons not only agree with their country’s rejection of the fiscal union, but want to take the opportunity to pull out of the European Union entirely.

Saturday, December 10, 2011

As I write this, Russia’s western cities are seeing the biggest political rallies since the fall of the Soviet Union. The rallies, in the aftermath of a stolen election, have drawn 100 times as many participants as political observers had predicted.

The election in question is a parliamentary election, but the political discussion has echoes of past presidential votes voided by political elites in Iran and the United States. Signs and chants speak of corrupt old men, decaying institutions, and stolen votes.

It is a measure of the success of globalization that the same political problems and actions can pop up in all corners of the world simultaneously. Recent scenes in St. Petersburg are indistinguishable from those in Oakland. This makes Russian government claims that the United States is behind the unrest on the streets of Russia ring especially hollow. If that were the case, then who is behind the identical protests on the streets of the United States and thirty other countries? The fact that Russian leaders are parroting the complaints of the regime in Iran make their comments all the more comical.

The common suggestion that political corruption is the cause of the popular protests is equally implausible. The United States government has sought to draw some distance between itself and corrupt business interests in the last six years, while the government in Russia has drawn ever closer to its corrupt and criminal commercial supporters, yet in both places, along with many others, the protests are happening now.

Friday, December 9, 2011

The same European countries that were instrumental in turning Greece’s accounting problems into an international financial crisis are now promising coordinated fiscal action, with the details of a treaty to be worked out in the coming weeks. The European Central Bank lowered interest rates this week in an effort to reduce banks’ and governments’ borrowing costs.

A live letter-bomb was sent to a Deutsche Bank executive, but was intercepted by mail workers and disarmed by police. The return address indicated the package was sent from the European Central Bank. Police say a political group, in a letter written in Italian, claimed responsibility for the device and possibly two others.

Thursday, December 8, 2011

Much of the recent online discussion surrounding PayPal has focused not on Regretsy, PayPal’s latest in a long string of innocent victims, but on Etsy. Etsy may have helped inspire the name of Regretsy, but the main reason people made this connection is that Etsy shares the same business flaw of being effectively dependent on PayPal to clear financial transactions.

In business terms, this is an inexcusable lapse on Etsy’s part. From what I have read in the latest discussions, Etsy’s rules virtually require its buyers and sellers to make payments via PayPal, a payment processor owned by Etsy’s largest competitor, eBay. This puts eBay in a position of conflict of interest: it can, through its security decisions, effective bar buyers and sellers from Etsy, its competitor. It is an arrangement that puts Etsy and its customers in a particularly vulnerable position.

But it is not just a matter of a flawed and fragile business model. It is also an incongruity, a lapse of community integrity for Etsy. Etsy is a site where sellers can sell only items they have made themselves. This is part of the reason for Etsy’s success in a marketplace dominated until recently by eBay. Although eBay’s marketplace policies officially permit sellers to sell articles they have made themselves, eBay’s security policies make it clear that it frowns upon such activity. A person who sells handmade items on eBay does so at risk of being banned from the site. Hence, it makes much more sense to sell these items on Etsy.

Etsy, in this role, offers a way for shoppers to bypass the whole distribution network. They can buy articles directly from the people who make them. Cool. But then, the payments for these articles have to go through a huge corporation that is in bed with Wall Street, and this huge corporation takes a substantial cut, generally more than 2 percent, of every transaction. Not cool. Etsy is largely negating its cool factor by palling around with PayPal.

This is particularly awkward at the time of the Occupy movement, the Move Your Money campaign, and the buy-local meme. Millions of people are actively looking for ways to bypass the corporate control of commerce. They want to buy and sell things more directly, without the involvement of huge corporations acting as gatekeepers along the way. Etsy could be providing this. But it isn’t. Weird.

Etsy has not publicly commented, but with so many of its sellers worrying openly about PayPal, Etsy must realize that it has to do something.

Wednesday, December 7, 2011

Wow! How can big companies with reputations to protect fumble so badly?

That’s the reaction to two unbelievable stories of the past two days.

PayPal froze the account of a well-known business, Regretsy, just because it was collecting donations for a Christmas-season toy drive. There was not the slightest indication that the business was doing anything wrong or anything different from what PayPal publicly recommends. News outlets accused PayPal of ruining Christmas for hundreds of children.

CBS-owned CNet Download.com, one of the best-known software download sites, has been bundling malware with its downloads for at least two days. The new CNet installers trigger alarms in security software, and computer security experts say the extra software they install could damage users’ computers. Dozens of news headlines combine “CNet” and “malware,” words that previously no one would think of putting together.

In both cases, the big question is, where are the managers? CBS cannot afford the malware association any more than Sony could with its music CD spyware (the Sony spyware saga, recall, led to the closing of most U.S. record stores), and PayPal could lose billions in revenue because of the chilling effect of so publicly freezing innocent customers’ money. So why are low-level workers being permitted to put the company’s future at risk, while the real business people at the company learn of the problem only through the news media?

It is the same thing that happened to AIG. That insurance company’s executives did not even know that technicians routinely traded the company’s net worth thousands of times over in securities of the most dubious kind. By the time senior managers understood what this actually implied, it was too late to save the company.

With these two stories, PayPal and CNet, popping up simultaneously, it makes me wonder if this is a trend. Have big businesses in general given up on oversight of their own operations and employees? If they have, of course, then there is more trouble on the way.

Shoppers spent more than they planned to on Black Friday, and have little money left to spend in the stores in December.

The survey suggests that in spite of the late start of holiday shopping this year, with not much happening until one week before Thanksgiving, shoppers still see the beginning of December as the time to start wrapping up their holiday shopping. It is an earlier schedule than we saw just a decade ago, and in my opinion, this shift is driven by the time pressure that many people experience during the holiday season.

Monday, December 5, 2011

For those who watch television, The Young Turks is debuting tonight. Based on the Internet history of the people involved, it will be the rare TV news show that has some relevance in the discussion of the state and flow of the U.S. economy.

The U.S. Postal Service (USPS) is about to propose a slowdown in mail processing. This would mainly affect first class mail. Instead of being delivered within 3 days, usually in 1, first class mail will be delivered within 5 days under the new plan, and usually in 2 or 3.

The way I see it, this is a prudent step toward reducing the frequency of mail delivery. With the USPS months away from running out of money, and its biggest customer, the United States government, also having to cut back, mail delivery will surely soon be cut back to 3 days a week instead of the current 5 or 6. In the long run, 20 or 30 years out, I believe it will have to be 1 day a week.

The volume of mail has dropped 20 percent from its peak and will inexorably drop to less than one fourth of current levels. Raising postage rates across the board would accelerate the decline in mail volume, as it has done already. The USPS will have to cut costs, and quickly, and that mainly means cutting back on the level of service.

Sunday, December 4, 2011

The flooding in Thailand might have been worse than forecast, but the hard disk drive factories are bouncing back faster than anyone expected. Some factories have already resumed production, and near-normal production levels are expected around April.

Demand for desktop computers continue to be soft, so widespread shortages of hard disk drives are not so likely. However, the potential for shortages did put something of a damper on price promotions for desktop computers during the Christmas season.

Saturday, December 3, 2011

In the past two weeks there has been a big push for “S.T.E.M.” — training in science, technology, engineering, and mathematics. The United States, it is said, is falling behind the rest of the world in these technical areas. Supposedly, large number of jobs in these fields are going unfilled. Handpicked commissions are calling the situation a crisis.

Don’t fall for it. If it is true that the United States is falling behind, it is not because of lack of training, but because of lack of interest from business. Plenty of people, millions actually, have all the training you can get in an area of science, technology, engineering, or mathematics, but aren’t working in their field because the jobs aren’t there. How many jobs are there really? Go to any major job site and search for “mathematician” as a job title. Good luck finding anything at all, anywhere in the United States. Nor do botanists have it much better. I found 1 job for a mathematician and 2 for botanists when I searched at Monster.com. Were you thinking of becoming an astrophysicist, seismologist, or oceanographer? Where would you work? When I searched, I could not find a single job opening with those words in the job title. A search for “Geologist” turned up 70 openings, but still, that is 70 jobs for the thousands of unemployed and underemployed geologists in the country to fight over.

A search for “scientist,” “technology,” or “engineer” is more fruitful, but these words are mostly found in combination with other words and long lists of required skills and experience. It is not enough to be an “engineer” or even an “electrical engineer” if you want a job. If you are an electrical engineer with experience in automotive safety, there may be a job for you, but that is not a skill combination you can qualify for based on education alone. It is the same story with most S.T.E.M. jobs. They require rare combinations of very specialized skills. When you look at the jobs available within any specialty, the numbers are small. And when technical workers apply for jobs outside of their area of specialty, they have the same chance that a dishwasher or taxi driver would have applying for those openings.

As a society, we shouldn’t be trying to push people who have an apprehensive feeling about technical work into technical fields. As an individual, you will do better, financially and otherwise, working in a field that appeals to you. If you really, really want to be a scientist, you will find a way to make it work. But if you go into a technical field just because of the promise of large numbers of jobs, you are likely to be disappointed. And for businesses, the skilled workers with advanced degrees are there for the taking, whenever they decide they are really interested in hiring.

Friday, December 2, 2011

The discussion surrounding the financial condition of the failed hedge fund/brokerage MF Global shows that many people don’t recognize the prominent role that off-balance sheet accounting plays in banking. These creative accounting techniques hide bad assets and worryingly large liabilities outside the company, often in shell companies nominally owned by independent investors. Recent commentary suggests that some observers and journalists had imagined that this was merely an accounting fraud employed by the likes of Enron and Worldcom. In fact, though, off-balance sheet accounting is a recognized and pervasive part of the banking industry. Among other things, the U.S. credit card business would not exist without off-balance sheet accounting.

MF Global’s accounting maneuvers appear to be legal, at least in their details released so far, and not so different from accounting practices at its competitors. MF Global hid, or at least deemphasized, the extent of its exposure to sovereign debt. Other banks, brokerages, and funds, you may safely assume, use the same approach to hide other categories of weak assets, and the public may never notice until the company goes under.

Too big to jail: The term “bankster” used by political activists to describe shady and self-serving bank executives is often an exaggeration, but not in Spain. The government there has decided to pardon a convicted criminal, Alfredo Saenz, so that he can continue to serve as CEO of Banco Santander, that country’s largest bank. Santander’s holding company is also the parent company of Boston-based Sovereign Bank, one of the United States’ banking giants. The presence of a felon in the executive suites of a bank is not as significant as the specific crime Saenz was convicted of. In the 1990s, Saenz and two other bank executives fabricated accusations to send four customers to jail (though all were released when the truth was discovered) in an attempt to squeeze an extra €4 million out of them. Banking regulators in Spain could still take action to bar Saenz from the banking industry based on his criminal record, but that would have been automatic if Saenz had been sent to jail.

On Wednesday, the NCUA liquidated BCT Federal Credit Union, of Binghamton, New York. It had 3,900 members. Member accounts were transferred to Visions Federal Credit Union.

Another credit union was liquidated tonight. It was O.U.R. Federal Credit Union of Eugene, Oregon, with 1,379 members. Member accounts were transferred to Northwest Community Credit Union.

The advertising line for the Chevrolet Volt, “Somebody has to be first,” takes on a whole new meaning with the recent revelation that the car’s battery pack has a strong tendency to smoke or catch fire. No one has been hurt, but it is just a matter of time. General Motors is worried enough to recall the car before it has had time to think about a fix. Supposedly it is removing the Volt from the road temporarily, but it also has not made any promises about how soon the car could be redesigned and rebuilt.

At the time that General Motors released the Volt, it appeared as if it was rushing to release a second-round prototype design that hadn’t been meant for production. Two recent revelations about the battery pack reinforce that perception. First, as mentioned, the finding that the battery pack is fairly consistent about generating excess heat, smoke, and fire when damaged. This suggests that General Motors had not had time to test for this before or at any point in the first year of the car’s release. Competitors have been testing their cars in this manner for more than a decade, so it’s hard to escape the conclusion that the Volt was released very early in the product development cycle. Second, that there was no published procedure for discharging the battery pack after it is damaged. That is the kind of maintenance procedure that would be normally be written and tested for a year or two before a car’s release. For it not to still not exist a year after release is hard for automobile industry observers to understand. It creates the impression that the product design work is not very far along at this point.

General Motors had little choice but to trot out the Volt a year ago to support its stock offering. But it did not have to ship it by the thousands while the design engineers were still working. Now, a noticeable fraction of the funds from the stock option must be used to repair the cars that were shipped prematurely, along with the damage done to the Chevrolet brand and General Motors’ reputation. With a flurry of actual electric cars coming to market in the coming year, boasting the kind of thorough product testing that the Volt obviously did not have, General Motors looks a lot like the new kid on the block, trying to catch up with an industry that has a several-year head start on it. Which, of course, it is.

It does not help that General Motors insists on calling its hybrid vehicle an “electric.” General Motors famously killed its actual electric car in the 1990s. Now it has killed its ersatz “electric” car. It’s like it just can’t help itself.

Thursday, December 1, 2011

In the end, Bally Total Fitness did not survive the upsell strategy it put in place five years ago.

Bally planned to boost revenue by getting more members to hire personal trainers. To this end, it reminded its members of the availability of personal trainers about 20 times on each visit to the facility. Members who did not have personal trainers were put off by this approach, and membership numbers and attendance both plummeted. Bally went bankrupt twice. It closed and sold many of its locations, especially in the center of the country.

Now Bally is selling most of its remaining locations, covering its best facilities, most of its geographical areas, and more than half of its members, to LA Fitness, in a deal that closed late yesterday and takes effect at the start of business today. Bally will retain just 100 locations, along with its exercise equipment products and other product lines. The deal appears to be structured so that LA Fitness is buying just under half of Bally’s assets.

The majority of the acquired clubs will remain open, but some will be closing before the end of the year.

LA Fitness plans to hire the employees from the locations it is acquiring, including the locations it will be closing. It will be moving equipment from the clubs that close to its other locations.

Bally will continue in a sense, but faces an uncertain future after its transition from a national brand to a local one. More important in a business sense, its serial bankruptcies ensure that its previous owners and creditors will not profit from its continued operation.

It is a cautionary tale for executives who would imagine that upsell is a risk-free way to grow a business. Sometimes upsell is an appropriate strategy, but the risks are greater than with most marketing strategies. If your marketing approach alienates prospective customers, that is a problem, but if it alienates your existing customers, you could lose your whole business.